Oil price slide hits Bursa energy stocks

KUALA LUMPUR: Energy stocks took a beating on Bursa Malaysia on Thursday after crude oil prices slipped below US$100 a barrel for the first time in six weeks, amid growing expectations that the United States-Iran conflict could ease.

The sell-off dragged the Bursa Malaysia Energy Index down 21.45 points, or 2.59 per cent, to 806.47 from Wednesday's close of 827.92, even as the broader market rallied.

Of the 35 energy stocks listed on Bursa's Main Market, 17 ended lower, 11 were unchanged and only seven advanced.

Hengyuan Refining Company Bhd was among the hardest hit, plunging 57 sen, or 15.75 per cent, to RM3.05 as investors reassessed the outlook for oil prices and refining margins.

The sharp decline came after an extraordinary rally that had seen Hengyuan's shares more than quadruple this year, making the refiner one of the biggest beneficiaries of the oil price surge amid the US-Iran conflict.

Refiners such as Hengyuan can benefit from rising oil prices through inventory gains, although their profitability also depends on the difference between crude oil costs and refined fuel prices.

Its rival, Petron Malaysia Refining & Marketing Bhd, also declined, shedding nine sen, or 2.77 per cent, to RM3.16.

Other energy counters were not spared.

Enra Group Bhd tumbled eight sen, or 10.13 per cent, to 71 sen, while Hibiscus Petroleum Bhd lost 15 sen, or 7.28 per cent, to RM1.91.

Vantris Energy Bhd slipped 1.5 sen, or 5.56 per cent, to 25.5 sen.

Energy stocks bucked the broader market rally, with the FTSE Bursa Malaysia KLCI rising 19.30 points, or 1.19 per cent, to 1,635.86 on improving global sentiment and easing geopolitical tensions.

Brent crude futures for January delivery had plunged 8.7 per cent to US$94.62 a barrel on Wednesday, their lowest level since Aug 31, as expectations grew that the US-Iran conflict could ease.

At press time on Thursday, Brent had recovered slightly, rising 0.53 per cent to US$95.12 a barrel, while West Texas Intermediate crude slipped 0.25 per cent to US$87.90.

The retreat in oil prices followed the Democrats' victory in the US midterm elections, which saw the party secure majorities in both chambers of Congress.

The outcome raised expectations that President Donald Trump's administration could face greater political pressure to bring the conflict with Iran to an end.

Investors have since begun reassessing the geopolitical risk premium built into crude prices, as the prospect of easing tensions reduces fears of supply disruptions in the Middle East.

The Democrats' victory in the US midterm elections also weighed on technology stocks, amid concerns over tighter regulation of artificial intelligence (AI) and data centre-related companies.

Back home, the Bursa Malaysia Technology Index fell 3.17 points, or 4.27 per cent, to 71.14, making it the worst-performing sectoral index of the day.

The decline mirrored a sell-off in US AI and data centre-related stocks, as investors braced for greater regulatory scrutiny and potential changes to technology tax incentives.

Reports suggested investors were bracing for tighter regulatory oversight, possible rollbacks of technology tax incentives and greater antitrust scrutiny under a Democrat-controlled Congress.

Such measures could potentially slow the rapid expansion of AI infrastructure, weighing on sentiment towards technology-related counters.